Nike Inc. shares went down after hours on Tuesday after the company lowered its sales forecasts and said it would only make short-term predictions for the coming months. This was done to give the company’s new CEO time to find a way to move forward after months of falling demand.
Nike NKE 0.83% was trying to keep investors’ hopes in check as it got ready to hire Elliott Hill as its CEO on Oct. 14. Hill has worked for the company for about 30 years and will retire in 2020. Nike’s CEO, John Donahoe, will leave his job the day before, having worked there for more than four years.
During Nike’s earnings call on Tuesday, Chief Financial Officer Matthew Friend was the only executive who took questions. He said that the company was dropping its full-year outlook and would only give quarterly forecasts for the rest of its fiscal year, which ends in May. Also, the company is delaying its investor day, which some experts thought would happen.
“This gives Elliott the freedom to get back in touch with our teams and employees, look at our current strategies and business trends, and come up with the best plans to put the company in the best position for fiscal year 26 and beyond,” he said.
He also said, “A comeback of this size takes time. We’ve had some early wins, but we haven’t turned the corner yet.”
Friend said that the company thought sales would drop by 8 to 10 percent in the second quarter.
Analysts weren’t sure that Nike would be able to quickly turn its fortunes around because shoppers are being picky after big price increases and the company has a lot of competition. While Wall Street waits for more information on how Hill might be different as a leader, some have said they might be ready to look past the problems now.
In any case, Nike stock dropped 5.9% after market hours on Tuesday, after going up 0.8% during the day. The price of the stock had dropped 17.9% since the beginning of the year as of Tuesday.
This year, Nike NKE 0.83% had a net income of $1.05 billion, or 70 cents a share. This is less than the $1.45 billion, or 94 cents a share, it made in the same quarter last year.
Sales dropped 10% from the previous year to $11.59 billion.
FactSet polled analysts and found that they thought Nike would report earnings per share of 52 cents and sales of $11.64 billion.
Friend told the investors on the call that traffic drops in Nike Direct, which includes Nike’s own shops and online sales, were worse than expected. During the quarter, sales in that group dropped 13%. Wholesale sales, or sales to stores, went down 8%. The company says it can do better in this area now that its internet business is more important.
Back-to-school trends fell flat in other places. In China, where the government is working to fix the economy, demand also went up and down. Nike also said that trying to sell fewer classic sneakers caused problems after putting out so many Jordan 1, Air Force 1, and Dunk shoes, which the Wall Street Journal said made them less appealing. Nike hopes that faster releases of new products will help fill the gap.
“But the early wins,” Friend said, “included gains in fitness for men and in running shoes for both men and women.” Because of names like On Running, the company has tried to get more regular runners to buy from them. Friend was also positive about the new padding designs that Nike is going to add to their running shoes.
Friend said that Hill helped North American growth pick up again in 2010, when the economy was still healing from the Great Recession. Hill did this not only by selling high-performance shoes and gear, but also by getting people to buy into a larger sports culture.
He also said that the business was looking forward to Hill’s comeback.
Friend said, “You can feel the vitality and excitement as you walk around campus.” “And we’ve only heard great things from our partners and teammates all over the world, including our alumni network.”
